My Worst Investing Mistake. Ever.

Investment Analysis Clubs Saul’s Investing Discussions
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Last night I discovered I hadn’t answered a lot of replies on the boards. My bad. The first one I read
was a question from someone here. I had mentioned something about recently making my worst investing
mistake ever, and someone asked me if I would be willing to elaborate on this so we might learn
something from it. I can’t find the darned post since I already looked at the replies once so of course
it goes < POOF >. Anyway, it is kind of interesting and since the request was made by YouKnowWho with
his name on this board, I thought I’d give it a shot from memory.

Last December I posted that I was going to rearrange all my ports by selling several positions, adding
several new ones and reallocating most everything. Soon after, I did just that, but I was leaving for a
few days and knew I would not be accessing the internet until I returned home. Meanwhile, remember back
at the end of December? Most every stock mentioned here including my holdings appeared headed for orbit.
Missing out on a week of gains when some weeks were gaining by double-digit percentages seemed a high
price to pay. Plus, as I had mentioned previously, I had been lax in putting cash from several sales
back into new investments, for months. So the first thing I did was to write limit sell orders for all I
intended to sell.

The trip meant 5 days of no access, fast grower stocks going to the moon, almost half of my cash dormant
and I had a comprehensive plan worked out for allocation in all the ports.

I got greedy. What to do? I wrote dozens of limit buy orders for the stocks I wanted. Since they had all
been going up swiftly for over a month and I didn’t want to miss out on so much potential profit I
decided it would be safe to enter all the buys before leaving, although I probably wouldn’t have many
orders deploy since I was asking for a discount in a fast rising market. Next I got the current prices
for everything, deducted a percentage that varied by company (not much, usually only 0.5% to 1 or 2%
under the last price) and let fly a few dozen orders in several ports totaling a sum requiring 6-
figures.

My trip went great, got back, was tired so unpacked & went to bed. The next morning I find out what
happened in the market while I was gone. The first day, the day I left town, BOOM! went the market!
Boom! went every. single. holding. Whoosh! went every. single. limit buy order. “Bingo, you now own
umpteen new positions.” The second day of my trip? Boom! Repeat of the first. The third day? Boom! Same
thing. I don’t remember what happened the rest of the week in the market. But I knew my newest
investments were now well under water. No big deal, been there done that. Well, not really. Maybe not
with so much mass, so many brand new companies and so many dollars. All those shiny new tickers that I
spent so much time studying and allocating sizes for, tanking before I even get to welcome them to the
team.

My scheme to save a week of almost half of my funds in opportunity cost in a red hot market ended up
costing much more than the opportunity cost (which didn’t even exist, the market having decided to
surprise me with a canyon-sized crunch.) Color me disappointed. The final tally? Not life-changing,
nothing ruinous. Just very disappointed and my ports, while decidedly up, are up much less than they
would be without my scheme by an impressively high stack of hundred dollar bills.

Oh, did I mention that these portfolios … they aren’t all mine, I also invest for relatives. That’s
what made it so disappointing, and even if I lost more than anyone, that didn’t help with the
disappointment. Fortunately, these new investments have, except for 2, all recovered and several are
even up quite nicely.

What went wrong?

  1. Greed. I knew better and I broke my own rules due to my aversion to missing out on gains.
  2. My first rule is the same as WEB’s. Never lose money. I’m pretty sure I broke that one.
  3. Another rule is that every investment doesn’t have to be a home run. What every investment does have
    to do is (See Rule #2.) Broke that one too.
  4. Don’t let any order, buy or sell, sit unattended for more than 1 day or 2 at the max (and not ever
    with orders totaling half your investing nut!) That’s so obvious it wasn’t even a rule. :slight_smile: Now it is.
  5. All those brokers weren’t lying! “Past performance does not guarantee future performance.” Darn, I
    knew that.

I could keep going with what I did wrong, but the list would be too long and I’m tired of beating on
myself. Did I learn anything? Sure, but more in a collective memory box “Darn, that was weird” sort of
way than any particular “Never do this again!” way. It seemed like a rather reasonable solution to my
need for greed. :slight_smile:

Saul, I hope you aren’t too sorry you asked. Let fly with advice, criticisms, a$$ chewings and heckles.
There’s a line of Fools behind you who want their turn. Bear’s laughing so hard he might have to go home
and change.

Hey guys, it isn’t that funny.

  1. Darn it. Wrong again.

Dan

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Dan:

If you never come to the plate and swing the bat you will never strikeout.

And if you do come to the plate, sooner or later you will strikeout. One piece of advice, keep swinging, and keep having a great attitude because you will succeed more than you fail.

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Dan,
Thanks for posting, that took some guts.

It doesn’t come close to my worst investing mistake, although mine wasn’t very costly because it was back when I was dabbling rather than investing so there wasn’t much money at stake.

I’ve got two that will probably out-stupid everyone here . . .

The first goes back to the 80s. I had a friend in the office, I’ll call her Sue (not her real name). Sue had a boyfriend, Bill (or whatever), who was, I don’t remember exactly, mechanical engineer or something. Anyway, Bill was working for, in fact a principal in a start-up. The company that didn’t really exist saw a big problem with garbage in Vancouver, BC, Canada. The problem is where to put it (per the start-up, I never looked into it personally). They were simply sunning out of landfill.

So, these geniuses put together a scheme to bail the garbage and transport it to Alberta where there was just oodles and oodles of empty space that could be made into landfill.

Wow! What a great idea! I didn’t pause even for a moment to wonder why no Canadians hadn’t thought about it. Needless to say, this was a 100% loss.

Number two? Have you ever received a pamphlet in the mail describing the investment opportunity of a lifetime? You guessed it, I took advantage of one of these great classic pump & dump ideas many years ago. Ironically (and it never occurred to me until just now), this one too was related to garbage. They were listed, I think on the NYSE, but maybe NASDAQ. HQ in Bermuda.

This company’s plan was to employ patented technology that burned industrial waste in order to generate electricity. And, according to the information I received in the mail, they already had deployed their solution in a number of remote locations, some in China (long before I ever visited there) and a couple of others, I don’t recall where. This was truly a ground floor opportunity. How could it miss? It solved a waste disposal problem and it delivered a useful resource in the process. Oh, and as the stock price went down, I bought more.

I kept that one in my portfolio for along time just as a reminder. Finally realised the small loss a few years ago. I don’t need that reminder any longer to steer clear of this kind of stupidity.

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Rock, that’s funny! If I’m not mistaken, that story was in the national news somewhere. If not, I read
one quite similar because I remember wondering about the health of the people were the garbage was
shipping to.

I’ve got two that will probably out-stupid everyone here .

Whoa, not so fast, cowboy. I could be in the running. I did say worst. I should have said biggest. If
you want pure dumb, I’ve got lots to pick from.

My “best” dumb move was careless error. Twice I’ve entered tickers in buy orders where 2 characters were
transposed. Twice! One never deployed. The happy one was weird. Not only did the order hit after several
days (similar price to the target stock) but I only found out the error after holding it for 2 weeks
when I was surprised that this baby just kept going up every day and in 2 weeks or so, it was up 12% in
a benign market. I went to the website (well, some website) and didn’t even recognize the company. It
was so squirrelly and their website so childish that when I figured out the error I was afraid it would
implode before I could enter an order to close the position. I never typed so fast.

2 weeks, 12%. Happy dance. Made me think maybe the “Better to be lucky than good.” saying was true.

I’m not dyslexic but for some reason for 2-3 years after, every time I saw that ticker I still saw it
with transposed symbols just as I entered it in the (wrong) order. Don’t know why.

Have you ever received a pamphlet in the mail describing the investment opportunity of a lifetime?

You gotta be kidding. How do you think I got here? Oh, I was a Hidden Gems Rock Star before I learned
which button was “Buy” and which was “Sell.” Again, I’d rather be lucky than good. I’m lucky I’m not at
the local dive right now singing for 50cent Pabst draws with the owner of the defunct Bubba’s Investing
Emporium and Men’s Thongs XL.

Oh Danny boy, the pipes, the pipes are calling …

Thanks for sharing, O’ WasteWizard.

:slight_smile: Dan

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And if you do come to the plate, sooner or later you will strikeout. One piece of advice, keep swinging, and keep having a great attitude because you will succeed more than you fail.

< blush > I bet you say that to all the intellectually challenged.

–anonymousnotdan

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Wastewizard! Gimme a break, like I said, I never before recognized the common thread between these two “investments” before I wrote that post . . .

But at root, we were both driven by the same motivation, greed.

The only redeeming feature (for me anyway) was that I recognized it was a gamble with both of these “opportunities” and therefore limited my downside. Good thing as they were both 100% loss.

I still get those pamphlets occasionally, but I think most of these lifetime “opportunities” have migrated to the web. Reduces printing and mailing costs and probably has greater reach. I’m sure there’s a certain amount of science to it. They know in advance what the response rate is going to be within a standard deviation. They know what to expect in terms of percentage gain and when to bail. Probably even know what the appropriate entry price needs to be in order to draw people in. It’s a well thought out, statistically safe scam.

But there’s another thing going on, the belief that the only way to make any real money in the market is to have some hidden edge that others don’t. Otherwise you’re up against the “professionals” who “know” much more about every issue out there. You have to believe that you can’t swim with the big fish and come out ahead.

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Talk about Murphy’s Law!

There are times when I place a limit order after the market closes for a deal better than I expect to get, and plan to adjust the limit the next day. And then the order gets filled because the stock is plummeting. (Or it jumps on good news, and maybe it’s because I didn’t realize either way that earnings were being reported.) Or sometimes I get lucky and there’s a brief dip (jump) before it goes back up (down), and my order gets filled.

So your “blind” transactions could have gone the other way, but now you learned to remember Murphy before pulling the trigger.

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Saul, I hope you aren’t too sorry you asked. Let fly with advice

Hi Dan,
My only advice is that I have learned from bitter experience to NEVER use good-until-canceled orders (because I forget they are out there with disastrous consequences), and always use day orders. And my day orders are 95% market orders. I buy at the current price and don’t put buy orders below the current price or sell orders above the current price (because I may not get them).

For instance, if I want to sell at $69, and put in an order at $71, suddenly the price is at $63 - and I could have sold at $69!

Why did the price drop. Maybe a bunch of other people wanted to sell for the same reason I did? I don’t know. It just happens.

I think your problem was not so much leaving open orders, but leaving so many of them. If you had just left one or two for a small part of your stake it wouldn’t hurt so much.

I hope you survived the catastrophe.

Saul

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IGU,

Btw Thank you Saul.

But IGU, you are going back to the year 2000!

Lets set the record straight. On Rambus I made a 26x return (using naked call options) so I sold! Then in 2003 or thereabouts, a 50% return on Rambus when I subsequently bought it, and then sold it. Did you miss the memo? Did you pay your subscription fee to my monthly newsletter - oh right, I don’t charge for a newsletter.

As for Celeara, I don’t recall if I ever even owned Celera. Celera was a celebrated pick of the Fool, ultimate Rule Breaker as they were going to identify the entire human genome, biggest thing in history, and the stock went to the moon until the public DNA project started to get its act together. If I owned it, I clearly sold it, as I do not recall making any loss or gain on it. Lots of people regretted not buying it as the Fool was a power back then and when David Gardner recommended it, it went to the stratosphere. It easily hit bubble heights (ever read my rule sof selling?).

Wow! First you are going back nearly 20 years, and second, you are mad at me for stocks that either I made money on, or that Fool recommended with fanfare!

Sorry man/gal, that ain’t my problem. You might want to look internally for your issues.

Tinker

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